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Volti Ch. 5 – American Cars in the Post-War Years

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The two decades after World War II saw incredible success for the american auto industry. Profits soared and technical innovation clipped along at a rapid pace. This success was unlikely unanticipated, considering that the U.S. was coming out of a costly war and millions of men and women would be flooding a barren job market. The opposite, however, occurred. Demand soared for cars, in large part because new production had ceased during the war leaving the used car market barren. This drove the demand curve for new cars out, pushing up the price and increasing the quantity.

This increase in demand, it seems, was the leading factor in spurring the success of the auto industry in America and the innovation which that success sparked. While the “Big Three” continued to consolidate their market share during this period, they started producing more diverse lineups. According to Rudi Volti, in 1951 Chevrolet only produced one basic car body, with minor trim differences separating the models. However, by 1958 Chevy was producing eight differentiated models. This product differentiation can be credited to the public’s thirst for different, new styles.

Beyond creating new and exciting models, the “Big Three” also began creating more and more advanced cars technologically. The V-8 took over as America’s favorite engine and they continued to become larger and more efficient. Technological advances, however, only reflected what the public demanded. With little government regulation, safety was far from a priority in the eyes of the major car companies. Seat belts could be purchased as an optional extra, but this option was rarely exercised. The same was true of recessed steering wheel hubs, breakaway rearview mirrors and crash-proof locks. The demand simply was present for these features, despite their benefits being, potentially, incredibly high. Eventually, after the risks of not having these features became apparent, the government was forced to step in and regulate their use.

Increased demand for cars also translated to cars’ complement goods. For instance, the national highway system was supported by a great number of interests ranging from average consumers to the military to commercial interests. This public good was then funded, through tax dollars, with strong support from all these interests. Similarly, franchised motels and fast food chains became popular due to the proliferation of road trips. Consumers wanted places to stay and eat that they recognized and could trust. Accordingly, nationwide chains sprouted up along popular high way roots to meet this demand. The rise in demand for these complements provides an example of the external effects that the proliferation of personal cars had on American culture and the American economy.


  1. mayolj16

    Some questions to think about the topic: What do you think made the US different from other countries? Why didn’t the auto industry boom in Europe, Asia, or South America? Why was the US the only country that used the tax on gas almost fully on infrastructure (highways) while other countries used it on other type of government spending? It is very interesting how this early investment on infrastructure helped develop the economy even further through the creation of new businesses along the highways. Nowadays one can still see how underdeveloped the area along highways is most places in South America (at least in the places I have been), where the investment on highways was never a priority, and is just starting to develop.

    April 23, 2014
  2. Except as the US came out of WWII without direct damage from the war, were we different from other countries? In other words, if we use GDP per capita, made comparable with a purchasing power parity exchange rate, aren’t motor vehicle markets similar? [I can’t provide a careful answer, my hunch is it’s “yes, but”.] Given the starting point in Japan and Germany and Italy was almost zero, the car market expanded rather quickly. In Japan, the market doubled every 2-3 years during 1956-1970; Germany must have been similar. So how about China in the early years, that is the 1990s? Now it may not be meaningful to look at growth rates near the zero point, but that’s where statistical models could help pin things down: if we put in GDP levels and population age composition and a business cycle measure and (perhaps) urbanization, is the “fit” similar across developing countries?
    The complementary goods aspect is fascinating, and likewise amenable to cross-society comparisons.
    Finally, money is fungible. I would be more interested in the level of gasoline taxes, not whether they are “targeted” to a particular [auto-related] goal. To rephrase, we should raise money using the most efficient tax, which may not be directly related to the public goods that bring the greatest benefit per amount invested. (Of course roads might not rank high on that latter list, just as gasoline taxes might not rank high on the former – those are empirical questions.) All this is “pure” economics, because however efficient a tax might be, it also has to be politically acceptable and administratively feasible. A gas tax is pretty simple to collect, there aren’t that many wholesalers, and at least as long as roads are poor but are being improved, it may be something that legislatures approve. But I have no particular knowledge of that, only that there are plenty of studies out there if you wanted to research such issues.

    April 30, 2014

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